Ms Collins is keen for private companies to again compete with the Corrections Department to run new prisons, including a 900 to 1200-bed jail due to open by 2012.

Maori Party co-leader Tariana Turia said Maori would see great opportunities and she would not be surprised to see some groups or iwi putting in tenders.

"Many Maori have considerable experience in prison work, not only in this country but also in Australia," she said.

"And in the past some iwi have expressed an interest in running prisons."

Mrs Turia said while New Zealand had "home grown problems" it seemed to be importing staff and ideas from other parts of the world to run prisons.

"It just isn't working," she said.

"As in areas like health and social services -- where Maori are successfully contracting to deliver services -- it might also be time for a fresh look at prisons and I would encourage that."

Labour's law and order spokesman Clayton Cosgrove said running prisons was core government business and National's move was based on "pure ideology".

The previous National government allowed private companies to tender for jail contracts, and let the management of the new Auckland Central Remand Prison, opened in 2000, to an Australian firm.

Labour canned the contract in 2005 when it passed a law that removed the ability of private companies to run jails.

Ms Collins said it cost $42,000 per inmate to run the Auckland remand centre when it was headed by Australian Correctional Management, compared with the average cost of $52,000 in a Corrections Department facility.

The contract for the Auckland jail included a $50,000 fine for each escape.

Mr Cosgrove said the figures were misleading as the national average included the cost of running maximum security prisons.